After mandating Tata Sons to list, RBI files a caveat in Bombay HC
Mumbai, Sep 15 (PTI) After rejecting Tata Sons' application to surrender its NBFC registration, the Reserve Bank has filed a caveat in the Bombay High Court, in an attempt to ensure that it is heard before any order is passed in the matter by the judiciary in the high-stakes battle, sources said on Monday.
The RBI's rejection of the March 2024 application compels the holding company to list on the bourses, and many parties including the Tata Trusts, its largest shareholder owning over two-thirds, is reluctant to go for the listing.
In a scenario when any petitioner approaches the court, the caveat ensures that the central bank's side is heard before any order, including even a stay on the order, is passed.
When contacted, neither RBI nor Tata Sons responded.
The board of Tata Sons is expected to meet as per schedule on Thursday, and sources said any legal challenge to the RBI order can come only after the board meets.
The central bank ended months-long suspense by rejecting Tata Sons' plea, after which it is classified as an upper-layer non-bank finance company (NBFC) and must list.
The development comes as the USD 170 billion Tata Sons is still facing leadership challenges and a divided board, which led chairman N Chandrasekaran to opt out of reappointment when his term ends in February next year.
It is a divided house even among the shareholders, with the Noel Tata-led Tata Trusts, a string of non-profits holding over 65 per cent of Tata Sons, being reluctant to list, while Shapoorji Pallonji Group, its largest private shareholder with around 18 per cent holding, is publicly pushing for the group to list.
According to experts, a listing will compel the group to be more transparent about all its affairs, including capital allocation, and investor pressure will lead to demands for financial returns making long-term bets difficult.
As per news reports, the issue of listing the business was also among the reasons which led Noel Tata to vote against the reappointment of Chandrasekaran. The half-brother of Ratan Tata, who chairs Tata Trusts and is a member of the Tata Sons board, wanted a commitment from Chandrasekaran to ensure that Tata Sons is not forced to list, while the latter is learnt to have opined that the outcome of a regulatory or legal matter cannot be ascertained.
Other issues flagged by Noel Tata included the losses being incurred by the group's other businesses, including Tata Digital and Air India, which were either launched or acquired during Chandrasekaran's nearly decade-long stint at the helm.
The RBI released a list of 15 entities, classifying them as Upper Layer NBFCs and mandating them to list by October 2025. Earlier this year, it had expanded the list to include government-run NBFCs as well and also announced that any NBFC with over Rs 1 lakh crore of assets will automatically qualify as an upper-layer NBFC.
However, a decision on Tata Sons' plea to surrender its core investment company NBFC license was kept pending, and the RBI brass repeatedly parried a clear answer regarding Tata's listing.
Tata Sons, which has assets of over Rs 1.75 lakh crore, reportedly underwent major changes to prevent a listing, including a deleveraging exercise.
